Demand of Petrolium Product

8/8/2019 Demand of Petrolium Product

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DEMAND OF PETROLIUM PRODUCT

SWAPNIL S. MURUDKAR.

SACHIN A. KANASE.

RAKESH L. CHAUDHAR Y .


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HEAD OF CONTENT

INTRODUCTION

MAJOR DEMAND

FUTURE PROJECTION

FACTOR AFFECTING ON DEMAND

ELASTICITY

CONCLUSION


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INTRODUCTION

The demand for Petrol, oil and gas begins at the

individual and corporate level. Individuals drive cars, heat

and cool their homes, and consume food and other

services, all of which require either directly or indirectly oil, gas, and petroleum-derived products. Industry

provides goods and services that require energy to

function.

Petrol prices are touching the sky, however this is not

stopping one drive a petrol car.


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Many factors impact the demand and supply of oil and

natural gas, influence how and where energy companies

invest their capital, and determine the manner in which

countries compete to attract foreign investment. The relationship between the various factors and their

relative importance is subject to interpretation, including

price, inventory levels, geopolitics, market psychology

and manipulation, OPEC policy, exchange rates,unexpected events, and resource availability.


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MAJOR DEMAND

Petrol, Oil & gas demand escalated across the world,especially in the emerging economies, due to increasedindustrialization. The growth rate of petroliumconsumption in China and India.

for example, is 9% and 3% per annum. The share of oilconsumption has also increased among oil producerssuch as the US and Russia. The US consumesapproximately one-fourth of the global oil supply. The

per-capita consumption of the nation is six times theglobal average per capital consumption of four barrelsper annum.


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At the world level, gasolines comprise 31 . 6.%of

consumption, middle distillates 3 5 . 7 %, fuel oil and other

products 2 0 . 5 %.

The Asian pattern of product demand, especially Chinas,includes a larger portion of demand, 1 3. 8 % in the case of

China, dedicated to fuel oil. This percentage is approximately

three times that of the United States.

The use of fuel oil in industry accounts for the difference, as

well as the lower requirements for gasoline for private

automobile use.


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The chief petrolium producing and exporting nations (according to theEnergy Information Administration,) include:

Saudi Arabia: The nation produced about 1 0. .7 2 million barrels per day,of which it exported 8.. 6 5 million barrels per day.

Russia: The nation produced and exported 9. 6 7 million and 6 . 5 7

million barrels each day, respectively. Iran: It produced 4. . 1 2 million and exported 2 . 5 2 million barrels per

day.

Mexico: The country produced over 3 . 7 1 million barrels per day, ofwhich it exported 1 . 6 8 million barrels per day.

UAE: The nation produced approximately 2 .9 4 million barrels a day, of

which it exported 2 . 5 2 million barrels a day. Product demand analysis reveals that there are regional and country

differences in the mix of oil based products consumed. Gasolines, middledistillates, fuel oil, and other products are the main groups.


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Future Projections

The International Energy Agency recently reduced its

forecast for global oil demand in 2005 . It estimated that

world demand would be 8 4. 3 million barrels per day in

2005. This value represents a growth of 1 .77 millionbarrels per day, or 2.2% above 2004 levels.

In a typical manufacturing or service market, demand

growth of this magnitude might be welcomed, and met

with increased job creation and facility expansion, ormore intensive use of existing facilities.


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Demand for petrol-driven cars has seen a sudden spike just

when most carmakers have been ramping up their diesel

engine capacity to meet huge demand that led to more than

six months waiting period for the diesel versions of popular

cars.


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FACTOR AFFECTING DEMAND OF

PETROLIUM PRODUCT1. Price :

Price is by far the most accessible and reliable dataseries available, and thus, is a preferred explanatory variablefor supply and demand forecasting. Crude oil price is

determined in the world market and depends mainly on thebalance between world demand and supply.

High prices lead to increases in exploration and developmentbudgets,

and as new oil and gas is found and brought to the market,supply increases and prices are typically reduced. High pricescan also make alternative fuels more competitive,

potentially reducing demand, and are likely to encourageconservation, further reducing demand.


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Inventor y :

The expectation that oil and refined product inventoriesinfluence prices is based on the assumption that prices reflect thecurrent supply/demand balance, and that inventories provide ameasure of the changing balance between supply and demand.

Geology :

The geology of a country or province will ultimatelydetermine the energy supply potential of the region. There is a finiteamount of oil and gas resources in the world, but whether we everextract all of the resource or find other alternative sources is a matter

of heated debate .At present, there is no good substitute for oil or gas,and so as long as demand outstrips supply, prices will remain atelevated levels.


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Technology :

Technological advances in the oil and gasindustry have been phenomena over the past two

decades. Vastly increased computing power hasstimulated the development and interpretation ofgeophysical data, which has led to a better understandingof reservoir characteristics. Progress in 3-D and 4-Dtechniques, advances in deepwater exploration,

horizontal drilling, multiphase pumps, floatingproduction storage and offloading vessels, have all madea contribution to increasing supply.


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Exchange rate :world oil is priced in dollars and

transactions are settled in dollars, and so changes inexchange rate of the U.S. dollar can affect the level and

distribution of oil demand in both directions. The effect of adeclining dollar depends on the import/export status of thenation and how the currency of the country adjusts to thechanging value. If the value of the dollar declines againstother currencies, the dollars received by oil exporting

nations are worth less in purchasing power, which mayimpact their production decisions. For oil importingnations, the impact depends on the trade-off between theadvantages of an appreciating currency and productexports.


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Discovery Rates :

Due to increase in price of petrol,oil,gas it

may lead to increase drilling activity ,which usually

results in increased production, but the geology andmaturity of the region in which drilling occurs are

constraining factors.

The chance of a large discovery is greater but the

development cost will be more ,which may lead toincrease in prise.


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Government policy :

Government policy takes many forms andcan have a direct impact on supply and demand and

investment patterns. Each nation in the world has avariety of regulations which affect investment in the oiland gas sector, including tax structure, price controls,import/export controls, access to prospective territories,fiscal policies governing E&P activity, etc. Each nation

also has geopolitical aims which affect investmenttrends,partnerships, strategies alliances, and regionalcooperation. Policy variables are difficult to model andare subject to a number of competing political processes.


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ELASTICITY

Demand for petrol is inelastic : petrol has no close

substitute. Motorists can reduce their usage of their car,

and perhaps drive fewer kilometres, but they can not fill

their ''tank'' with water! Motorists can convert their cars to run on liquified

petroleum gas ,which is considerably cheaper than

petrol, but the conversion cost is high. Petrol does have a

substitute; but LPG is not a close substitute.


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CONCLUSION

The world oil market, as a result of the convergence of a

number of factors, has experienced significant tightness since

the end of 2 0 0 3, continuing through 2 0 0 4 and the first

half of 2 0 0 5 .Some of the factors influencing the market

might be temporary, some may be cyclical, and others may

possibly be permanent. while the high prices that resulted

from the tight balance between oil demand and supply

caused increased energy expenditures for consumers,

business, and industry, it also led to higher incomes for energyproducers.


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Demand of Petrolium Product

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